If, as most people seem to be saying, New Zealand women are a bunch of sex predators who will do anything for a double vodka and almost anything for a mocha latte, how is it that prostitution is still a viable business?

This is a fair question, as she says:

After all, a double vodka costs $7.50 but full sex with a street walker costs $50 – $60 (cheaper in Papatoetoe and deals of 2 for $60 are available if you know where to look). And a mocha latte costs around $3.50 whereas the cheapest sex option costs $20.

However, I think this is a question that we should be able to answer fairly easily with our economist hats on.

The prices that Mrs Saunders quotes are not the true “full price” associated with the consumption of the associated good – they are merely the explicit price that is required to clear the market.

In order to get a clear idea of the factors that keep prostitution rocking in the face of the supposed looseness of New Zealand ladies I will start off by assuming that men are homogeneous (that we all have the same preferences). If I can describe situations where our ‘representative agent‘ will choose a prostitute over an easy girl, then I can also appeal to heterogeneity to explain the current make-up of demand for these two different types of consumption.

Now we can get an idea of the differing value of a prostitute vs a slapper by comparing costs and benefits. Lets look at cases when you get a net benefit from a prostitute compared to a slapper, many of these issues are caught in these twoarticles in the Times:

Prostitute net benefits

It is an easier transaction to facilitate.

Notice that buying a girl a vodka and lemonade does not constitute a binding contract for a service – paying them directly for sex does, therefore the agent is less likely to run into contractual issues.

Furthermore the search cost will be lower, as brothels are more clearly marked than slappers

There is lower uncertainty around the outcome of the service

Firstly, we know that a prostitute is more likely to sleep with the agent for money

Secondly, prostitutes have had more practice and so are likely to provide a higher quality service

It is safer

Health wise, prostitutes have sex with more people, but prostitution is legal in New Zealand – they have a reputation to uphold and so have a greater incentive to avoid diseases.

A prostitute gives a clear statement of intent regarding the services, preventing miscommunications and possible repercussions

The probability of getting dumped may be lower for some agent types, insuring risks on the downside

Simply put, our agents missus might not be as annoyed if he paid a prostitute instead of picking up randoms

The agent may be able to activity gain a greater service from a prostitute given the contractual nature of the relationship

Our agent might be able to do freakier stuff, if his utility function is that way inclined

In many ways, choosing to buy a prostitute provides a higher benefit than hooking up with a random, or it may simply offer lower costs. This tells us that even with homogeneous agents we could have a successful sex industry in this environment as long as either prostitute sex is a sufficient better product and/or the “full price” (including costs for uncertainty and STD risks) is lower than sex with a slapper.

Hmmm interesting. But I suspect that the reason that men choose easy women over hookers has a lot to do with social acceptability. As even if it is legal, most women and I suspect many men look down on those who purchase sex from prostitutes.

“But I suspect that the reason that men choose easy women over hookers has a lot to do with social acceptability”

So there are two points you are raising here that would lead to more sex with non-prostitutes.

1) The cost of a prostitute may be higher through its potential impact on your reputation (eg probability of getting caught X the reputation cost when caught)

2) There is a social rule that it is inappropriate to have sex with a prostitute (which was likely formed because of the “social costs” associated with having sex with a hooker)

I agree with both those points 🙂 .

In my inital analysis I was trying to solely show the reasons why someone would sleep with a hooker instead of some slapper, which is why I only listed things where there was a net benefit from sleeping with a hooker. As a result, you are extending the set of costs and benefits in order to work out the whole spectrum of issues that influence the clients choice of activity.

You left out three important cost: time, effort, and risk of getting caught. Even if the girl is really easy and you’re as hansom as I am (hypothetically, because that’s not possible), you still have to talk to the girl (time and effort), pretend you like her (effort), wait for the girl’s drink (time), wait for her to drink it (more time), wait for the check (time), cab ride to the cheapest motel in town (time, cab fare), chit chat in the motel room (time, effort). The risk of getting caught with a prostitute is lower since you’re probably less likely to run into her at the mall or supermarket when you’re with your wife. If you do run into a prostitute, she probably won’t say anything because she wants her repeat business. On the other hand, the skank you picked up at your local bar might make a scene. Multiply the odds of that happening by the cost of a divorce, and the hooker will seem quite cheap.